UCL logo

UCL Discovery

UCL home » Library Services » Electronic resources » UCL Discovery

Wage risk and employment risk over the life cycle

Low, H.; Meghir, C.; Pistaferri, L.; (2008) Wage risk and employment risk over the life cycle. (IFS Working Papers W08/06). Institute for Fiscal Studies: London, UK. Green open access

[img]
Preview
PDF
14943.pdf

Download (673kB)

Abstract

We specify a structural life-cycle model of consumption, labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects. The sources of risk are shocks to productivity, job destruction, the process of job arrival when employed and unemployed and match level heterogeneity. Our model allows for four main social insurance programmes. In contrast to simpler models that attribute all income fluctuations to shocks, our framework allows us to disentangle the effects of the shocks from the responses to these shocks. Estimates of productivity risk, once we control for employment risk and for individual labour supply choices, are substantially lower than estimates that attribute all wage variation to productivity risk. Increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving. Increases in employment risk have large effects on output and, primarily through this channel, affect welfare. The welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks.

Type: Working / discussion paper
Title: Wage risk and employment risk over the life cycle
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.ifs.org.uk/publications/4317
Language: English
Additional information: Please see http://eprints.ucl.ac.uk/2656/ for related item
Keywords: D91, H31, J64
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/14943
Downloads since deposit
1,154Downloads
Download activity - last month
Download activity - last 12 months
Downloads by country - last 12 months

Archive Staff Only

View Item View Item